LightSquared's options to save its network are limited

Though would-be mobile carrier LightSquared says it still wants to find a solution to interference with GPS, its options are limited, industry observers said on Wednesday.

Following a recommendation from the National Telecommunications and Information Administration on Tuesday, the U.S. Federal Communications Commission (FCC) proposed indefinitely suspending LightSquared's authorization to operate a land-based network. It also called for cancelling a conditional waiver that would have let the carrier sell access to its satellite and LTE (Long-Term Evolution) networks separately. That waiver is conditioned on interference issues being resolved first.

The FCC's response came after months of charges and countercharges between LightSquared and backers of GPS, including the Defense Department and Federal Aviation Administration. In the end, it was critical federal agencies, more than the GPS equipment makers and industries that use the navigation technology, that probably drove the FCC to take the firm position it did, analysts said.

"In the spectrum world, GPS was too big to fail," said Maury Mechanick, an attorney at White & Case and a former executive of satellite provider Comsat.

While LightSquared and some advocates of greater broadband competition decried the possibility of shelving a project that could have brought a fast mobile network to 260 million U.S. residents, GPS supporters praised the FCC's decision.

"The FCC has acted appropriately by declaring that its non-interference condition has not been satisfied and that LightSquared will not be permitted to move forward with its proposal to build a nationwide high-powered terrestrial network in the mobile satellite band," the Coalition to Save Our GPS, a frequent LightSquared critic, said in a statement on Tuesday.

LightSquared and Philip Falcone, whose Harbinger Capital funds the fledgling carrier, both slammed the FCC proposals while holding out hope for a solution that would let the network go forward. In a statement released late Wednesday, Falcone said the federal government had ordered LightSquared to build a US$14 billion network and then blocked it from doing so. He said this decision was a political one driven by special interest groups and called for "rational public policy" to keep the plan alive.

However, there may not be much LightSquared or Falcone can do to reverse the tide. The FCC's decision came after extensive testing ordered by the NTIA last year, which concluded that a majority of consumer navigation devices would be negatively affected by LightSquared's network. The testers also concluded that interference would affect aviation receivers, though they found that GPS in cellphones wasn't affected.

Those tests might form the basis of a LightSquared strategy to win back its network dream, Mechanick at White & Case said.

To reverse the FCC's decision, LightSquared might challenge it in a U.S. Court of Appeals on the grounds that the agency reached its conclusion on the basis of a flawed testing process. The company has already laid some of the groundwork for such an appeal through formal complaints about the process, such as a petition for an investigation into conflicts of interest by members of the agency that oversaw the tests.

However, this would be a long shot, Mechanick said. Even if the court sided with LightSquared, the issue would go back to the FCC while the interference issue still hung over the company. Revising the testing process and conducting new tests could take a year or two, during which time LightSquared might not be able to survive financially, he said.

LightSquared also has tried to lay the blame for its network woes on the GPS vendors, saying they knowingly made receivers that scanned for GPS signals in the adjacent band, making themselves vulnerable to interference. But it probably isn't possible to translate this argument into a legal complaint, Mechanick said. Though anyone using a transmitter in an unauthorized way can be held liable for interference, one simply receiving signals outside the proper band typically can't, according to Mechanick.

In addition to its frequencies in the band adjacent to GPS, LightSquared also has rights to some spectrum in other bands that it could use for terrestrial services, according to Tolaga Research analyst Phil Marshall. However, this spectrum, in the 1.4GHz, 1.6GHz and 2GHz bands, is probably too fragmented to support a mobile broadband service, he said.

"They've got bits and pieces, but it's very hard to see that they can do anything with it," Marshall said.

LightSquared claims more than 30 wholesale customers, but those allies may peel off to use other networks with more solid prospects, Marshall said. One already has: FreedomPop, the startup formed by Skype founder Niklas Zennstrom that would offer free mobile broadband to some subscribers, announced on Wednesday that it has formed a strategic partnership with Clearwire.

Sprint Nextel, which last year signed a 15-year deal to host LightSquared's service on its new network in return for cash and credits to use some of LightSquared's capacity, has granted the company two deadline extensions to achieve FCC approval. "Sprint has been supportive of LightSquared's business plans and efforts to resolve interference issues expediently," the carrier said Wednesday.

However, Sprint could easily walk away from LightSquared with no great loss to its LTE capacity plan, Marshall said. Sprint is better off relying more heavily on Clearwire, of which it is the major shareholder, he said. "I don't think it's a major blow for them."

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